Atlantic Forestry March 2018

Discipline and sobriety

    It was kind of cute – borderline embarrassing, actually – to witness the expressions of mutual affection between the Nova Scotia forest industry and the legal team that has represented the province in the Canada-U.S. softwood lumber trade dispute. When Tom Beline and Jack Levy, lawyers with Cassidy Levy Kent, came up from Washington to speak at Forest Nova Scotia’s 2018 AGM, they heaped lavish praise upon their hosts, and they were welcomed as conquering heroes. 
    The warm feelings on both sides are entirely justified, of course. Levy said the provincial government wisely recognized that being lumped in with the rest of Canada, and therefore subject to heavy duties on lumber exports to the U.S., represented “an existential crisis for the forest industry in Nova Scotia.” The industry was quick to cooperate in forming the Atlantic Lumber Board – which administrated a certificate-of-origin program to verify that lumber sawn from Nova Scotia timber (or timber from Newfoundland and Labrador or P.E.I.) is entitled to duty-free treatment in the U.S. market. It was a big win in the softwood lumber war – the first product exclusion from both anti-dumping and countervailing duties.
    Beline pointed out that duties on Nova Scotia lumber exports were collected for most of 2017, before the certificate-of-origin program was formally recognized by the U.S. government, near the end of the year. U.S. Customs has about 180 days to comply with the order to refund those duties, he said, so producers should get their money back “by about July of this year.” 

    Looking further into the future, Beline put long odds on the softwood lumber issue being fully resolved anytime soon. “We can tell you that the view from Washington is that the Canada-U.S. trade relationship is at a very, very low point,” he said. “The other reason why there is not likely to be a settlement is, frankly, folks are making money, so there’s not a lot of pain in the marketplace – so the impetus to settle and live under regulated trade is not quite there yet.”
    Levy delved a bit deeper into the factors at play. “From my point of view, the Trump administration’s trade policy is informed by domestic politics and essentially the agenda of a base that’s maybe a third of the electorate, and President Trump is committed to supporting their perspective,” he said. “The pendulum may swing; we may have a new president with new policies, down the road. But for now, we actually expect to see more aggressive trade enforcement, not less – particularly this year.”
    Beline said if the pendulum does end up swinging back, opening the door to a negotiated settlement, Nova Scotia should be prepared to prove its case all over again. “What the U.S. industry would likely do is take a fresh look at the forestry system in Nova Scotia and form an updated assessment of whether there is still market orientation. In other words, since the exclusion was last granted, did the province get sort of drunk and disorderly in doling out subsidies to industry, or do we see a continuation of the discipline that has been a feature of this province across multiple governments?”
     He also offered some counter-intuitive perspectives on how Nova Scotia is positioned in relation to the American industry, and in relation to Ottawa. “Your number-one ally in obtaining and receiving the exclusions of the past has been the U.S. Lumber Coalition, because, frankly, what they pay for stumpage is what Nova Scotia sawmillers pay for stumpage; you’re looking at the same problem,” Beline said. 
    “Your number-two ally, historically, has been the U.S. government, because they are generally willing to defer to the will of the U.S. Lumber Coalition. The government of Canada has always been sort of conflicted, and the fundamental reason for that is that ... timber prices in Nova Scotia have been used as a benchmark to measure the magnitude of subsidy in other provinces across Canada. So we are not only a province to be excluded, we are part of the problem, in the eyes of the Government of Canada. That is a tension, and a challenge, in any negotiations.”

    That’s kind of sobering, but it is a useful reminder that Nova Scotia is unique. The province is not a Boreal timber powerhouse. It’s more complicated in its land tenure structure, and also ecologically. 
    This spring, Nova Scotians are waiting to see the forestry report from Dr. William Lahey. Long-term Crown licenses are on hold, pending this independent review. Based on the McNeil government’s lusty embrace of the Glaze report on education, one might assume that all of Dr. Lahey’s recommendations will be adopted lickety-split. You’ve got to wonder whether Zach Churchill wishes he was still on the natural resources file, instead of duking it out with teachers. Churchill got shuffled after he stated that the province was going to extend FSC certification to all Crown lands, as was recommended in another independent review. Lahey might come to the reasonable conclusion that renewing this commitment would go some way toward bolstering public confidence in DNR.
    Another reasonable recommendation would be to implement a robust plan for developing a hardwood lumber industry in the province. Governments have a pipeline mentality – an intemperate urge to get resources to market quickly – so implementing this kind of long-term project will require a big push. 
    A commitment to better hardwood management should tie in with a new approach to wood energy. Markets for low-grade fibre offer the false promise of fostering quality-improvement forestry; in reality, it’s always cheaper to supply those markets by liquidating low-quality stands, perpetuating the crappy-hardwood cycle. The two large biomass power plants in Nova Scotia should be replaced by smaller heat or co-gen plants spread across the province, with fuel supply derived exclusively from silviculture treatments on FSC-certified lands within a radius of about 50 kilometres.
    This spring also brings uncertainty about the Hemlock woolly adelgid, especially in relation to protocols for the movement of wood from the regulated zone in southwestern Nova Scotia. Moreover, some woodlot owners are wondering whether government munificence toward the Spruce budworm spray program (to suppress a native insect) will also be extended to the battle against HWA (which is an invasive species). Coincidentally, just as Nova Scotia is contemplating the deliberate introduction of exotic insects to prey on the HWA, a provincial Biodiversity Act is in the works. Should be interesting. DL